Production cut: OPEC to meet non-OPEC producers in Moscow

Analysts are now focusing their attention on the implementation of the OPEC deal which was joined by non-OPEC Russia for the first time in 15 years to coordinate production cuts by a combined 1.5 million barrels per day.

Rystad Energy predicted on Thursday that the OPEC deal should allow non-OPEC shale oil production to rise by 1 million barrels per day in 2018. Energy companies led gains in European equity markets.

But Eastern Petroleum chairman and Chief Executive Officer Fernando L. Martinez said it is too early to speculate because non-OPEC oil producing countries like the U.S. can also influence global prices.

In the days prior to Wednesday’s deal, the market assigned a low probability that OPEC would come to a meaningful agreement because of arguments between de facto leader Saudi Arabia and third-largest producer Iran.

The government promised today that local power tariffs will not change despite a jump in the worldwide oil price following a decision by Opec oil producing nations to cut production. “Stockpiles were starting to come down and this will speed that up”. By 11:43 a.m. EST, Brent was up $2.21, or 4.3 percent, at $54.05. Futures touched $US54.36, the the highest level since July 30, 2015.

Before the OPEC meeting, the U.S. Energy Department predicted that crude would rise to $50 or $51 a barrel next year. Total volume traded was about double the 100-day average.

Oil futures extended yesterday’s surge in today’s session, with the contract for January delivery on the New York Mercantile Exchange rising to a 6-week high with a move to $51.80.

But market expert Kamel al-Harami, based in Kuwait, said there were no losers from the deal. By cutting excess costs and rolling out new technology, these frackers are much more competitive than just a few years ago.

Wittner put it this way: “We need to see OPEC deliver”.

Algeria’s energy minister offered a middle ground – roughly 3.8 million barrels per day.

The agreement also involves non-OPEC countries, who will pare an additional 600,000 barrels a day, with Russian Federation committing to half that amount. Its suspension won’t affect the size of the group’s production cut, one delegate said. Due to the low prices which have been experienced in the last two years, output has fallen especially because most of the oil fields in China are aging and are therefore expensive to pump compared to other countries. “They want to see prices in the $US50 to $US60 range, not any higher because that would kick in too much North American competition”. Still, traders said profit-taking ahead of the weekend limited crude’s price gains.

Iran also threatened on Friday to retaliate against the U.S. Senate’s vote to extend the Iran Sanctions Act (ISA) for 10 years, saying it violated last year’s deal with six major powers that curbed its nuclear program.